ANNUAL UK consumer prices index inflation jumped from 2.7% in May to a 14-month high of 2.9% in June, although the increase was slightly less than the City had feared, according to official data.
The data, published yesterday by the Office for National Statistics, underlined the sharp squeeze on consumers' spending power at a time of poor earnings growth.
The ONS figures showed the major upward influences on the annual CPI inflation rate between May and June came from clothing and footwear and transport.
Overall, clothing and footwear prices fell by 1.9% between May and June, having dropped by a much steeper 4.2% between the same two months of 2012.
The ONS said clothing and footwear prices usually fell between May and June with the start of the summer sales. However, it noted that the fall in prices in this category between May and June 2012 had been the largest on record.
In the transport category, the main upward influence on annual CPI inflation came from motor fuels. Petrol prices rose 1p-a-litre between May and June, to £1.34.
This contrasted with a fall of 4.3p between May and June last year, to £1.33. Diesel prices rose 0.9p-a-litre between May and June, having fallen 4.7p a year earlier.
Although the annual CPI inflation rate of 2.9% in June was the highest since April 2012, it was below the City's forecast of 3%.
Samuel Tombs, UK economist at consultancy Capital Economics, said the June figure would probably have been "greeted with some relief" at the Bank of England on Threadneedle Street because a rise to 3% would have meant that new Governor Mark Carney would have had to write an explanatory letter to Chancellor George Osborne.
Howard Archer, chief UK economist at consultancy IHS Global Insight, noted that the June reading meant that the annual CPI inflation rate had averaged 2.67% in the second quarter, below the 2.9% rate projected by the Bank of England in its latest quarterly inflation report in May.
However, underlining pressure on household finances, he said: "With inflation moving up to 2.9% in June, the squeeze on consumer purchasing power remains appreciable given that inflation is running at more than three times underlying annual average earnings growth of 0.9% in the three months to April."
Mr Archer added: "June is unlikely to mark the peak in inflation. We expect inflation to climb a little higher over the summer, to peak around 3.1%, and then to start coming down gradually from the fourth quarter.
"However, much will depend on oil prices, which have recently firmed to trade at a three-month high of $109-a-barrel after dipping below $100-a-barrel at times in May and June."
Mr Tombs said June's inflation figures suggested underlying price pressures in the economy were still fairly weak and therefore kept the door "wide open" to further action from the Bank of England's Monetary Policy Committee next month.
The MPC will base its decision on whether or not to loosen monetary policy further next month on updated inflation forecasts.
Mr Tombs said the rise in annual clothing price inflation in June reflected largely the "very generous period of discounting" on the high street last year, rather than any pick-up in underlying price pressures.
Annual UK inflation, on the old all-items retail prices index measure, rose from 3.1% in May to 3.3% in June.
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